Diversified resources group Exxaro Resources Limited has been named as one of the top 10
mining companies worldwide to have delivered the highest total shareholder returns (TSRs)
over the 10 year period spanning 2001 – 2011.
The Boston Consulting Group (www.bcg.com) has released a report which stated that excellent
capital stewardship, robust organic growth and a strong, credible outlook for value creation
helped the global mining industry achieve average TSRs of 18% in the period 2001 – 2011, 15%
more than the S&P 500.
“Even more remarkable was the decade-long annual average TSR of the industry’s top ten: a
stunning 39%,” says the report. “Furthermore, unlike their industry peers, the top ten mining
companies continued to earn high TSRs during the second half of the decade, the period
encompassing the global financial crisis.”
In the report “Value Creation in Mining 2012”, the result of a study of 34 leading mining
companies, the Boston Consulting Group calculates TSR as a product of multiple factors
including the combination of revenue growth and change in margins as an indicator of a
company’s improvement in fundamental value. It then uses the change in the company’s
valuation multiple to determine the impact of investors’ expectations on TSR. Finally, the
model also tracks the distribution of free cash flow to investors and debt holders in the form of
dividends, share repurchases, or repayments of debt in order to determine the contribution of
free-cashflow payouts to a company’s TSR.
The Boston Consulting Group noted, “The mining industry clearly benefitted from the continued
economic expansion in emerging markets, which led to steadily rising commodity prices. Value
creation also was fuelled by production growth, margin expansion, and cash returned to equity
Revenue increases attributable to rising commodity prices accounted for nearly 14 of the total
18% TSR that the industry averaged. The remaining 4% was the result of a combination of
production gains, margin expansion, and contributions from cash flow.
The report’s top ten value creators for the period of 2001-2011 are Mexican miner Industrias
Peñoles (average TSR of 58,2%); Grupo Mexico (49,5%); the UK’s Randgold Resources (45%);
Canada’s First Quantum Minerals (42,7%); China’s Inner Mongolia Yitai Coal (40,2%); US miner
Cliffs Natural Resources (40,1%); Exxaro Resources (39,2%); Sociedad Químaca y Minera
de Chile (SQM) (36,9%); the UK’s Antofagasta (32,4%); and China’s Yanzhou Coal Mining
“In every dimension – from profit growth to cash flow contributions to multiple expansion -
the top ten mining companies outperformed the rest of the sample,” the report stated. “Even
more impressive was the fact that commodity exposure had no impact on success; the top
ten included a broad range of mineral producers, from gold and copper to coal and industrial-
The study identifies factors behind the dramatic performance of the top ten, namely that they
managed capital expenditures and consequent cash flows well. The result was evident in their
debt management, limited equity dilution, and dividend policies.
For the full report visit: www.bcg.com
Exxaro is one of the largest South African-based diversified resources groups, with interests in
the coal, mineral sands, iron ore and energy commodities.
Wim de Klerk
Tel: +27 12 307 3173